I am Chairman and CIO of Gramercy Capital Mgt. Corp., a NY registered investment advisor, which I founded in 1986. Gramercy has been ranked #1 in the Nelson's Directory of Registered Investment Advisors. I hold a B.A. in history from the University of Wisconsin, Madison and was awarded a Ford Foundation Fellowship. I earned an M.B.A. in financial accounting from the NYU Graduate School of Business and am also a CFA (Chartered Financial Analyst). I spent 15 years as a media and leisure analyst before I began managing OPM (other people's money) in 1980 at Manufacturers Hanover Trust where I oversaw their $250 million "mid-cap" fund. I have been the subject of feature stories in many publications such as The Wall Street Journal Business Week, Newsweek , and USA Today. I have appeared often as a guest on financial programs on CNBC, Bloomberg, PBS and Fox Business. I have been contributing to Forbes.com since 2006 so you can see my track record of commentary.

Evolving DuPont Emerging As A Leading Dow Industrial

It is interesting to note the number of major U.S. Industrial companies that have not been able to successfully migrate the shifting sands of time. Some of them have completely disappeared from the Dow after being leaders for decades. Think Eastman Kodak as an example. Sears Roebuck joined the Dow Index in 1920 when there were only 20 stocks in the Industrials. If there was any company that should have thrived with the advent of the internet, Sears was it. It was a catalog retailer long before everyone even had a phone much less a smart device in their pocket. You could either go into a store or order via mail.

Somehow it was left to Jeff Bezos and Amazon to successfully exploit the internet to sell just about anything to just about everybody. Once upon a time the Dow consisted of oil companies, steel manufacturers, and other heavy industrial companies. As our economy moved away from manufacturing toward financial and other services, the Dow has been altered to reflect that reality. Those once leading companies lost their aura and fell out of the Dow. It’s been decades since we’ve had a U.S. steel industry to speak of and a very long time since either Bethlehem Steel(1997) or U.S. Steel( gone since 1991) has been in the DJIA.

There are only a handful of the present Dow stocks that have survived through the decades since 1928 when the list was expanded to 30 members. The only way to do it is for a corporation to keep reinventing itself as DuPont is doing now, yet again. What’s unique now is that women are in the CEO slot as some of the Dow companies like Ellen KUllman at DuPont. She’s been joined more recently by Mary Barra at General Motors, and Virginia Rometty at IBM. Studies have shown that companies led by women, even the biggest companies, outperform the competition.

In recent years, DuPont has been redirecting its efforts toward biotechnology as it is applied to enhanced plant production and crop yields. They bought Pioneer Hybrid in March 1999 and have continued to add to that effort with other acquisitions from time to time. Plants are designed to be resistant to drought, particular diseases or to pesticides that the company also designs to enhance yields per acre. I first started paying attention to DuPont a few years ago when they were hot on the trail of biobutanol as a fuel source made from crops that humans don’t consume such as corn-based ethanol. The still somewhat elusive goal is to use switch grass or discarded material from corn production like the husks and the cob that aren’t eaten. It is taking longer than planned but the reward will be sizeable when the goal is achieved.

DuPont, on the other hand, has chosen to reinvent itself from a company dependent on cyclical industries like industrial chemicals, and paint for automobiles to one focused in totally new directions. The mantra is to help feed the world’s growing population with enhanced crop production from better hybrid seed and from nutritional additives to processed food products by adding soy or other products. Automotive coatings was also sold off as an effort to exchange cash cows for businesses where scientific research and investment could produce meaningful future growth. Operating from its base as a company that understands basic chemistry and coatings and where pure lab research is valued, it is taking that technology expertise and heading into exciting new directions.

I have been attending DuPont analyst day for several years now. I was always fascinated that many “chemical” analysts who had followed the company for years continually seemed to fail to notice the change in direction and reorientation of the company toward some major growth industries. Along the way, DuPont has been selling off cash cow businesses like its Performance Chemical activities, its second largest product category which includes its Teflon business, in favor of pointing toward a future based on biotechnology and better nutrition. To further that end, in 2011 DuPont acquired Danisco for $6.6 billion. One of the attractions to that deal was Genencor, a California company that Danisco had acquired. Genencor was working on enzymes to make ethanol from waste materials among other industrial applications. If you love Tide, it is Genencor’s enzymes that do get your clothes cleaner. I visited Genenco about 15 years ago and wondered why Wall Street pretty much ignored it. DuPont did not and neither did Danisco.

Also, DuPont has continued to work on the development of Biobutanol with BP. Progress has been far slower than originallh expected but biobutanol has several advantages. Because ethanol attracts and holds water, it cannot be transported in a pipeline. That means every production load has to be transported by tankers at much higher cost. Biobutanol doesn’t have that problem of water retention and also provides more power output to the machinery it is fueling. Ethanol is a serious issue for gasoline fired marine engines, especially if it holds water.

Nine years ago on 2/4/2005, DuPont was selling for $54.90. Like most stocks, it imploded to a low five years later at the bottom of the crash of $16.05 on 3/09/2014. It is only recently that DuPont has risen above that former high water mark of a decade ago. The company is a very different company with less cyclical and rather improved growth prospects for the future. It continues to invest in new product and values the kind of R&D expenditures that led it to invent Nylon, Dacron, Orlon and many other products decades ago that are still integral in many of its current products. It retains a robust patent portfolio but more importantly, it continues to find new uses for the things it has and continues to invent. Even so, few analysts have been recommending the stock as most have neutral to so so ratings . The most aggressive price target is $72, just 10% above current levels. Despite subdued support from the analytical community, DuPont is up 40% over the last 12 months vs. a gain of only 16% for the DJIA. Its strong biotech position should serve it well in the future as well as now.

DuPont recently declared its 438th consecutive dividend going all the way back to the fourth quarter of 1904. That’s a long , proud record. When we bought the stock the yield was 5%. Even now after the strong gains in price, it is still a yield of 2.7%, outpacing most cash alternatives. This is an excellent example of patient long term investing paying off with a rising stock and getting paid while you wait as well.

Joan E. Lappin Gramercy Capital Mgt. Corp.

Mrs. Lappin, Gramercy Capital and its clients own shares in DuPont at this time of the companies mentioned in this article. To follow Mrs. Lappin on Forbes.com, click on the button at the top of this article. To follow her at Twitter:@joanlappin. If you wish to to learn more about our patient long term investment strategy or for help with your investment portfolio: info@gramercycapital.com.

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“DuPont has been selling off cash cow businesses like its Performance Chemical activities, its second largest product category which includes its Teflon business…”

Actually, Ms. Kullman is in the process of dismissing two centuries of core competency in chemicals. She has not sold the chemicals unit, but has announced plans for spinning it off to shareholders within the next 15 months. Given the massive legacy of litigation claims, environmental liabilities, run-down chemical factories and facilities and unfunded pensions, no buyers have appeared willing to pay the price demanded by DuPont Management for the unit containing TIO2, Teflon, refrigerants, acids and various other chemicals…funfun..

At substantial risk, Ms. Kullman is betting the farm on the farm. Unfortunately, she will be playing second fiddle on the world stage to Monsanto in seed biotechnology, and to Syngenta and Bayer in crop protection, and to Novozymes in enzymes and food additives…funfun..

You sound just like the guys who usually sit next to me at the Analyst Day in Wilmington. I assume you, like they, missed one of the leaders in the Dow over the last year.

Don’t blame Ellen for years of decisions by prior management that went on for decades. You are right but even spinning those units off is a good thing. Nothing wrong with agribusiness going forward. Do you not like “the farm” when the world needs to be fed? Once upon a time, 200 years ago, this company’s bread and butter was explosives. They managed to move on after that and have a successful life. This seems better to me than the Eastman Kodak approach which was to sit around until there was nothing left and they had to go through bankruptcy. Pity too since EK invented digital photography just as Motorola and Nokia invented digital telephony.

Thank you for your thoughtful article and response. The issue with respect to spinning off chemicals instead of selling means there is no fresh cash, amounting to $billions from sales proceeds, which can be reinvested in the growth areas of DuPont AG & NUT. We do indeed and in fact like the “farm” for long-term equity investment, but prefer to go with the proven world leaders, the largest respective businesses in seeds, ag chemicals, and enzymes, and farm equipment, Deere, and irrigation equipment, Lindsay Mfg. …funfun..

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